Addis Ababa: The main objective of this Synthesis Paper is to provide a synopsis of the contents of three related papers, namely: the Issues Paper, the Action Plan and the Framework Document, Road Map, Architecture for fast tracking the Continental Free Trade Area (CFTA), simultaneously developed to respond to the tasks of boosting intra-African trade and elaborating modalities for fast tracking the Continental Free Trade Area.
Background: Features of intra-African trade in brief
Trade is widely accepted as an important engine of economic growth and development. There are many regions and countries of the world that have been able to lift their peoples from poverty to prosperity through trade. Although the African economy is characterized by a relatively high degree of openness, with the ratio of exports and imports to GDP amounting to 55.7% in 2009, trade has not served as a potent instrument for the achievement of rapid and sustainable economic growth and development for many of the countries. As a consequence, Africa remains the most aid-dependent continent of the world, unable to eliminate poverty through trade.
A key feature of Africa’s trade, which has had some adverse implications for its impact on economic growth and development, is its high external orientation and relatively low level of intra-regional trade. Intra-African trade stands at around 10 per cent compared to 60 per cent, 40 per cent, 30 per cent intra-regional trade that has been achieved by Europe, North America and ASEAN respectively. Even if allowance is made for Africa’s unrecorded informal cross-border trade, the total level of intra-African trade is not likely to be more than 20 per cent, which is still lower than that of other major regions of the world.
That African countries do not trade much with each other means that they have been unable to fully harness the synergies and complementarities of their economies and take full advantage of the economies of scale and other benefits (such as income and employment generation) that greater market integration would have provided. There are cases where products and services could have been sourced competitively from other African countries but were procured from outside the continent.
Due to the fact that Africa does the bulk of its trade with the outside world and the exports are heavily concentrated on primary commodities, the continent has been particularly vulnerable to external macroeconomic shocks and protectionist trade policies. This is evident from the recent global economic and financial crisis which, although not of the making of African countries, has had adverse impact on the continent’s economic performance. In today’s increasingly interdependent global economy, Africa cannot delink itself from trading with the outside world. However, the continent can reduce its vulnerability to external shocks and improve its trade and economic performance if its market integration is deepened and the countries do more of their external trade with each other. Thus, a major lesson to be drawn from the systemic shocks in the global economy is the need for Africa to promote intraregional trade.
Boosting intra-African trade and deepening regional market integration constitute a necessary response to the challenges facing Africa in the multilateral trading system and the global economy. By fostering competition among African countries, they will also assist in enhancing the latter’s’ capacity and prepare them to compete more effectively on the global market.
Basis for a new vision, momentum and action: Setting the agenda
For long, regional integration has been accorded high priority in the development agenda of African countries. The continent’s landscape contains a relatively large number of integration schemes. Inspite of this, market integration in Africa is weak and the level of intra-African trade remains relatively low as indicated earlier. It is in light of this situation that the 6th Ordinary Session of the AU Conference of Ministers of Trade decided to fast track the creation of a Continental Free Trade Area (CFTA). This was subsequently followed by the decision of the AU Assembly of Heads of State and Government to focus its January 2012 Ordinary Session on the theme of “Boosting Intra-African Trade”’ Boosting Intra-African Trade and Fast Tracking the CFTA: New modalities for action.
In order therefore to respond to these tasks, the African Union Commission and its collaborating partners, the UNECA, AfDB, RECs and other partners set to work to develop proposals aimed at addressing the challenges of boosting intra-African Trade as well as fast tracking a Continental Free Trade Area. The results are the production of an Issues paper, an Action Plan and Framework document for launching the fast track process to accomplishing (achieving) the CFTA . All three documents together form the basis for the agenda setting on boosting intra-African Trade and fast-tracking the CFTA.
